The rehabilitated system will be more efficient and will help Latvia reduce harmful emissions, said Laila Ivana, spokeswoman for Rigas Siltums, the state-owned heating company.
The $138.1 million project includes evaluation of "ownership options" according to a statement by the World Bank, which is contributing US$36.2 million.
But privatization seems unlikely in the near future. Parliament has just rejected plans to privatize Latvenergo, the state energy company, and the future of the two companies should be decided together, said Ivana.
The project will make the system more environmentally friendly, agreed Janis Ulme, head of foreign relations at the Environmental Protection Club of Latvia.
The rehabilitated system will be similar to those in Scandinavian cities, according to Ivana. On environmental grounds this is preferable to systems in countries like Britain, where heat is produced in individual homes, Ulme agreed.
Hot water will still be piped under Riga's streets to substations which reheat it, as Ivana explained, but these substations will supply individual buildings, rather than clusters of buildings, as happens with the current wasteful system.
"In Soviet times energy was cheap. No one calculated heat loss," she said. "But heat loss is very high."
Riga's two co-generation power plants produce heat as a by-product of electricity generation, so it still makes sense to heat water at these central plants, a principle endorsed at the 1997 Climate Change Conference in Kyoto, Ivana said. A new pipeline under the Daugava River will extend the reach of the co-generation plants in the south to Riga's northern districts.
Although increasing the proportion of energy generated from gas will reduce harmful emissions, Latvia should look seriously at the possibility of using renewable energy sources, such as the sun, wind and waves, suggested Ulme.
"Opinion is currently against renewable resources," he said. " We'd like to get an expert assessment of what is possible in Latvia."
Lower heating bills will improve social welfare in Riga, claimed Artis Jurke of Riga Municipality's information and public relations bureau.
But Uldis Valdemars Zarins, chairman of the Society of Large Families of Latvia, questions the municipality's commitment to social welfare. The society helps large families who no longer receive the kind of support available to them in the Soviet era. Very poor families often live in homes with no central heating, he pointed out. The current social assistance program is inefficient and hard to access, he claimed.
"So far the system hasn't worked," he said. "They usually find reasons not to give money to large families."